Are these good deals? History would say no. The granddaddies of privatization were Fannie Mae and Freddie Mac, the housing giants whose public role was supporting the secondary mortgage markets. These companies were “private” in the sense that they operated without public accountability. But eventually, their losses ended up on the public’s balance sheet.

Most privatization deals of core public assets have the same essential structure as Fannie and Freddie. Listen to a Goldman Sachs managing director, John Ma, who expressed his reservations about the privatization of Amtrak’s Northeast corridor.

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“Structuring these public-private transactions are always a delicate balancing act,” Ma explained, “of what risks the public sector will retain and what risks you’ll try to transfer to the private sector.” Privatization doesn’t actually make something private; it simply divides risks between public and private entities.

In fact, the real allure of privatization is that it offers what looks like a free lunch. The public receives revenue, but privatization keeps the costs hidden by deferring them to the future. Political actors get to close deficits without raising taxes on wealthy interests. And the political muscle is provided by the people who ultimately benefit from the deal — the same way that Countrywide, Fannie Mae and allied private bankers brutalized their political critics in the name of homeownership.

Republicans often get the added benefit of eliminating unionized workers and driving their ideology of shrinking the amount of social resources under public control.

For Democrats, the benefits are more subtle. Privatization allows them to paper over the party schism between liberals and neoliberals by spending money for social aims through what is, essentially, an off-balance-sheet channel.

Take the continuing chatter around an infrastructure bank, which would be funded by a one-time tax holiday on corporate cash held abroad — hardly a sustainable financing source.

Ultimately, of course, we will have no choice but to rebuild our infrastructure or risk social collapse. It’s not just the disintegrating bridges and extreme weather. Recent global supply chain disruptions suggest that certain parts of corporate America may turn toward a pro-infrastructure posture out of self-interest.

Meanwhile, the ideological fight is not over whether to spend more on infrastructure. It’s whether we should privatize what’s left.

Matt Stoller worked on the Dodd-Frank financial reform law and Federal Reserve transparency issues as a staffer for Rep. Alan Grayson (D-Fla.). He is currently a fellow at the Roosevelt Institute.

Readers' Comments (65)

Very interesting article, it seems to me though that the American taxpayer has been taken for a ride once again...The American people paid for the infrastructure of this country and then it became the envy of the rest of the world.

Large corporations made hundreds of billions of dollars using that Unites States infrastructure ( U.S. INF) and gaining access to the wealthiest consumers on the planet while they hired teams of lawyers and accountants to figure out how not to pay their fair share of maintaining the U.S. INF and then they hired teams of lobbyists to get laws enacted to make sure they couldn't be charged for using the U.S. INF.

I think a we need two new U.S. INF taxes implemented; #1 A use it or lose it U.S. INF tax on any corporation with over one hundred million in cash doing business in the U.S. has to invest in specific U.S. INF projects which may include U.S. building renovation and U.S. equipment purchases or U.S. job creation or face an annual 40% tax on these monies, onshore or offshore.

#2 A 7% INF tax on ALL internet sales, e-bay, Amazon, everything. This tax would be collected by the seller and paid to the State of residence for the end user of the product sold. So if I live in Colorado and my Mom lives in Florida and I buy her a new TV for Mothers Day on Amazon, Florida gets the INF tax money for using their roads etc.

The States are going broke because of falling revenues and small local brick and mortar businesses are facing increasing pressure to compete with internet sellers not burdened with taxes or sales staffs or rent, we can help level the playing field for small business ( real small businesses not the fake designations of late ) by at least making internet sellers pay their fair share for the roads and police and fire depts they count on to deliver their goods safely to American consumers.

The end phenomenon of these policies is ideally to create jobs and promote local small business, and of course rebuild our once world famous infrastructure...

The interstate was because of Eisenhower and how he had to move troops across the country.

It had NOTHING to do with the auto industry lobbying.

Neither was the Hoover Dam built by unions.

Nor was the Alaskan Highway which was built in less than a year..Over 1,000 miles.

The Empire State Building was built in 410 days by Immigrants who wanted to work.

Think unions could do that now?.....Never.

We had a better country BEFORE unions destroyed it after the 60's.

Unions sent their OWN jobs overseas and then blamed companies.

IF you can't make a profit ...you look elsewhere to build your product at less cost.... otherwise you might as well close up shop.....results are the same......NO jobs because unions priced themselves OUT of jobs.

Those who were taught by socialist professors think government is the end to all needs.

Well they're NOT.

The projects mentioned were BECAUSE people wanted to work NOT because of unions.

Sure we need unions to make for safe workers but now they over-reached when we have laws on the books to protect them.

Matt Stoller needs to read real history and not some fable from a left socialist that leaves out information not desired by the left.

We used to make ships but unions priced themselves out of that industry also.

Now the only ships built are military....Once the left decides to cut that they will be out of work.

Our Constitution laid down our Federal government rules.....They were few ......

Central Government IS the cause of todays problem.....All you have to do is walk into any government office and try to get waited on let alone see how much they waste our tax money.

Privatize as you can FIRE them if they don't do their job ...while you can NEVER fire the Government for doing a lousy job.

Publicly funded infrastructure leads to high cost union wages, inefficient and ineffective service. Look at Metro. It's a giant money pit for abominable service and incompetence and high labor costs for union labor. Remove the public subsidies, make it charge fares that cover its costs, and the only difference would be lower wages. Any private entity that pays bus mechanics $100k would be bankrupt. The airlines don't pay their jet mechanics that much, and their work is vastly more complicated. We continue to use tax subsidies for roads and bridges instead of using tolls to put the cost of infrastructure where it belongs. The result is massive congestion, subsidies for trucks over rail, and an unwillingness to fund mass transit. Let's put the costs on the users and let them choose where they want to spend their money.

Skint lives in an alternate reality of pink ladies and caliphates. Facts have nothing to do with what he posts.

skint: Jun. 8, 2011 - 10:17 PM EST

The projects mentioned were BECAUSE people wanted to work NOT because of unions.

Take this rant, for instance. No where in the article does it say that all progress was made because of unions but skint saw the word and imposed it onto all the advances the article talked about. Fantasy, pink ladies and caliphates.

Public Pays the Price for expansion of Government Monopoly run programs without a chance to change to something else. This article is pure sophistry and why nothing ever improves when government is involved.

I don't know what fantasy world you got this from but you have really drunk some koolaid. You are the kind of person that is really trying to turn america into a third world sink hole

Sorry but you are dead wrong and need to read some history. When Eisenhower came back from the ETO he realized America need a system of highways to move goods across country and started the Interstate Hwy initiative and changed the country.

Matt Stoller worked on the Dodd-Frank financial reform law and Federal Reserve transparency issues as a staffer for Rep. Alan Grayson (D-Fla.). He is currently a fellow at the Roosevelt Institute.

Matt Stroller graduated from Harvard where they do not encourage common sense.

He is also a blogger for the "Free Press" ...His boss?.....Craig Aaron, Free Press’s President and CEO, formerly worked as managing editor of the socialist tabloid In These Times....... (Think net neutrality Obama taking over the net in a power grab)......the very leftist organization with George Soros financial backing.

Everything he talks about is what he wants SPENT and CONTROLED by government.

I guess he's been in a fog since leaving his past Job with that nut Allen Grayson....hint..Drop that.

Lets look at Fannie/Freddie that went private.

Government got INVOLVED and politicians stuck their mitts into it leaving us a horrific mess to live with.

Matt needs to study Barney Frank, Chris Dodd, Chuckie Schumer Cuomo, Clinton and why we the American taxpayers are PAYING for Raines still in court......Go blog about Raines Matt and let us know why we should STILL be paying for his lawyer bills.

Our dear politicians and government through HUD and putting quotas on deals thus giving themselves bonuses based on them no matter IF people could AFFORD to own a house........ happened because they cooked the books.

We're STILL paying for Government control over Fannie/Freddie BECAUSE government took control over them.

About the unions.....Obama already said that government projects would be based on UNIONS.

Want to build for the government?......Better belong to a UNION.

The Obama administration, the National Labor Relations Board and unions are standing in the way of job creation and economic recovery.

NOT private companies but CENTRAL Government.

Something they DON'T teach at Harvard......They teach government union control.

Don't send your kid to Harvard if they want to be in business.....All you have to do is go back and see the losers they put out.

"Yet it isn’t true, as a general rule, that privatization shrinks the public sector. When investor demand for high returns is combined with the natural monopolies of public assets, what often results instead is citizens finding themselves saddled with high fees and poor service.

In fact, the real allure of privatization is that it offers what looks like a free lunch. The public receives revenue, but privatization keeps the costs hidden by deferring them to the future. Political actors get to close deficits without raising taxes on wealthy interests. And the political muscle is provided by the people who ultimately benefit from the deal — the same way that Countrywide, Fannie Mae and allied private bankers brutalized their political critics in the name of homeownership.

Republicans often get the added benefit of eliminating unionized workers and driving their ideology of shrinking the amount of social resources under public control."

Well-written article. The Republicans con American and cannot resist trying to get their greazy hands on federal/taxpayers' money. Remember, their 435-plus, GOP-approved war-profiteers in Iraq and Afghanistan that cost taxpayers 30% or more, failed in their nation-building efforts; were not held accountable for their actions (protected by the GOP in Congress) that included the killing of locals and the poor quality of service for our soldiers and even contributed to the death of some.

The GOP Florida governor is privatizing the state prison system (a GOP favorite target) and in Arizona the GOP gov. sold off their state capital and went behind the scenes to change the state's laws on illegal immigrants helped by a private prison company that hoped to capitalize on all the new inmates arrested under the new GOP law. Also under Bush-Cheney, the number of top-secret companies exploded to 1931 with 854,000 government workers, 265,000 contractors (again, costing 30% more).

I realize that right-wingers do not watch PBS, but there was a series on the country's national park system. As shown, rich right-wing Republicans in the past repeatedly attempted to exploit natural areas for personal gain catering mainly to the rich as always. They would have dammed or damned the Grand Canyon; made Yosemite a tacky tourist site along with Yellowstone. As the article notes, they create fewer jobs, cost more, and generally provide poorer quality services.

Republicans have historically NEVER represented the working class. They are not the environmentalists, the ones that volunteer to maintain trails or clean-up. Instead they are the polluters--the energy and chemical companies poisoning our air, lakes, watertables, and waterways, destroying 500 mountains in Appalachia alone, etc. Their idea of green space is a golf course. They put profit over people and the environment. They are sucking the marrow out of America and Judgment Day cannot come soon enough. It is a moral issue and patriotism means service to one's country, protecting the environment and caring about the welfare of the entire country and its people not just those that look and sound like you do.

skint: Displaying your right-wing fantasy history rewrite? Hope you are getting paid to post your GOP lies (or spin as you call it). Man-up for a change wimpy. Tell us your education, your military service or service to country. The notion that Eisenhower would promote the Interstate system simply to "move troops" in peace time is plain stupid. Where are they going and in such large numbers that an Interstate system is needed? What a idiot. Why do you bother to blather away day after day on this site? Won't they have you over at Fox?

Even if readers were not Democratic supports, reading the trashy, stupid, shallow, bigoted, and self-serving non-factual posts of the ranting right-wingers here should give them pause. Join these lost souls and you may well get a chance to listen to them babble and scream for an eternity.

Privatization takes inherently governmental functions — everything from national defense to mass transit and roads — and turns them over to the control of private actors, whose goal is to extract maximum revenue while costing as little as possible.

That's interesting. My state has a nifty way of getting around that: It pays union-prevailing wages. The difference is, the construction is done from 8:30 am to 4:30 pm when unions are working--at the height of rush hour--but is done between 9 pm and 6 am when non-union workers are doing it. They use the same materials, vehicles, and equipment, but the union jobs take five times longer.

The one bonus of unionized workers is that none of them are over 55. In fact, those who are over 35 are supervisors of the water cooler or flagmen. It works out well.

Ex-Mayor Daley privatized the parking meters in Chicago before he left office and it is an absolute disaster. Rates have skyrocketed, tripled or quadrupled, and it is now much more expensive to go downtown. I avoid it whenever possible. Between the ridiculous meter rates, sometimes $4.50 an hour or more, the stop light cameras, the poorly marked and confusing parking restriction signs, and the toll roads, it`s become a huge pain in the rear to drive anywhere. Oh yeah, we have some of the worst traffic in the country too. Things were much better just a few years ago. Privitization sucks.

I hate to break it to you but the Cosa Nostra made Las Vegas into Las Vegas not some dam. And they did it by having polititians in their pockets to pilfer the public tresury like so much change as was fanmously described.

Skint-Still stupid, still spinning, the railroad was the only lobbyist in 1954? What an partisan idiot. You make Palin look like an intellectual. You are a coward, you neveranswer my questions about your education and background, though you attack others including the author's Harvard, you say, education. You are babbling to yourself and other right-wing armchair activist, big mouths like yourself.

Skint: If you or anybody wants to actually read about the Eisenhower Interstate Highway System under the Federal Highway Administration go their website and it will tell you all you need to know complete with photos. Eisenhower's initial roadtrip showed the sad state of the nation's road for military transport or anybody else. He would have never gotten it through Congress just as a need for the military. Once proposed, every construction contractor and corporation like Standard Oil, et al in American tried to get on the government gravytrain and urban sprawl of homebuilding. http://www.fhwa.dot.gov/inters...